Who Led the Baseline 500 & WhyBy Kim S. Nash | Posted 2012-05-03 Email Print
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We toughened our standards this time, so companies Had to be truly information-savvy to make the cut.
The Baseline 500 ranking is always a tough measure of how companies manage their information.
And this year, we got tougher.
In prior years, we ranked companies based on their performance in the most recent fiscal year. But this time, to identify companies that sustain exceptional performance, we used averages of the past five fiscal years' worth of data. We also excluded any company that lost money for more than one of those years. We can forgive a single year's mishap, but no more than that. So, companies such as Ampex, Cablevision, HomeFed and Owens Corning, all of which would have otherwise placed well in this edition of our ranking, were left off the list.
Among an initial pool of 4,952 publicly traded companies with $10 million or more in revenue, we looked at two performance metrics keyed to how a firm manages information: Information Value-Added and Information Productivity. They were both conceived by Paul Strassmann, a productivity expert and former information-technology executive at Xerox, Kraft and NASA.
First, we determined each company's Information Value-Added score, which is the profit left after subtracting the cost of capital invested by shareholders. Then we looked at Information Productivity, or IP, which is Information Value-Added divided by a company's costsselling, general and administrative expenses. IP scores determine the Baseline 500 ranking.
The list in your hands reflects true information agility and prowess, and Chesapeake Energy rules. It ranks No. 1 this year, its second consecutive first-place showing.
The $4.7 billion natural gas company isn't huge, but the managers there, from chief executive Aubrey McClendon on down, know what information they need and when. Chief information officer Cathy Tompkins makes it so. And she's free to do it without obsessing about cost because there is no annual information-technology budget at Chesapeake. The company manages expenses project by project.
"That doesn't imply we don't care about costs, but we don't get carried away and miss the big picture," Tompkins says. "The whole company is looking at long-term value, always, versus getting hung up on a cost number on a given day." (See our profile on p. 23, and check out go.baselinemag.com/baseline500 for an interview with CEO McClendon on what he wants from his budgetless CIO.)
Other midsize energy firms also made the top 20, including Apache Energy at No. 2 and Devon Energy, Chesapeake's rival, at No. 18. Several industries are represented up high, with manufacturer Eagle Materials at No. 3, service provider VSE at No. 8 and, in our media and entertainment category, Bowl America at No. 9.
Yet across industry sectors, Information Productivity varies, Strassmann notes. Technology companies usually don't fare well, and this year's more stringent ranking left most tech firms in the dust. Just nine made the ranking, including IMS Health, which offers specialized sales and marketing technology and research to the pharmaceutical industry, at No. 90. Lottery company GTech Holdings occupies the No. 110 spot, and Dell squeaked in at No. 492.
Banks, with their relatively low per-transaction costs, predictably placed high on the list. "It pays to manage other people's money," Strassmann says. The highest-ranking bankPerpetual Federal Savings at No. 15is, at an average of $21 million in annual sales for the past five years, one of the smallest companies on the list. I.T. matters, size doesn't.
Exxon Mobil is the largest company ranked, at No. 52, beating its 72nd-place finish last year. Other nimble giants: Anheuser-Busch (No. 112), Bank of America (No. 422), Cardinal Health (No. 380), Kimberly-Clark (No. 205), McDonald's (No. 463) and Procter & Gamble (No. 430).
To make information and the systems that carry it perform well, chief information officers have got to temper enthusiasm for technology, says David Hefler, information-technology manager at American States Water, a utility in San Dimas, Calif. (See our profile on p. 40.)
"Very often, you have an answer but nobody has a problem," Hefler says. On the other hand, CIOs must always be aware of the boundaries new technologies push. "And when a problem comes up," he adds, "hopefully you do have an answer."
You can bet the Baseline 500 companies do.